INTRODUCTION

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In recent decades the farm gate share of the retail pound has fallen significantly. To maintain viability farms have had two broad options. The first has been to specialise and expand, focussing capital-intensive production on a few key outputs. The low-price and high-volume supply chains that these farms rely on are often international in reach, increasingly consolidated, and increasingly dominated by a few processors, distributors and retailers. They tend to lead to lower farm gate prices, lower social returns, and fewer local benefits. The ‘race to the bottom’ this approach has created is the main driving factor behind the closure of 33,500 commercial holdings in the UK between 2005 and 2015.

The second option has been to stay small and diversify, focussing labour intensive production on selling a wider range of products into local markets and achieving a retail price to maintain viability. Farms that have chosen this option tend to provide significantly higher benefits for the community, economy and environment.

The wider value of these local, agroecological businesses is gradually being understood and recognised. The communities in which these businesses are based have opportunities to work on the land, learn about growing food and the local wildlife and ecosystems, and to expand their social network. Local food consumption is linked with improved access to healthy, affordable food leading to healthier diets and reduced food waste. Ecological production methods improve soil, water quality, increase habitats and biodiversity and help mitigate climate change. They tend to increase farm income and resilience, supporting higher rates of employment, providing a foundation for more resilient local economies as well as reducing energy use in production and lowering greenhouse gas emissions from food processing, packaging, transport and waste.

The most recent detailed research on wider economic benefits of direct sales and local supply chains in the UK was produced by the Campaign to Protect Rural England (CPRE) in 2012. They found that money spent in local food networks will be re-circulated within the local economy for longer and could be contributing £6.75 billion of total value to local economies. They found that spending in smaller independent local food outlets supports three times the number of jobs than at supermarkets. And that enterprises involved in local food played a key role as cornerstones for many other local businesses. The CPRE research confirms earlier work carried out by the New Economics Foundation (NEF) on the local multiplier effect. NEF showed that spending £10 in a local food outlet is worth on average £25 to the local economy, as it gets re-spent locally several times (a local multiplier of 2.5) whereas every £10 spent in a supermarket leads to only £2.40 being spent in the local area.

This work was taken further by researchers from the University of Gloucestershire in 2013 who calculated the social return on investment in local food. They concluded that every £1 invested in local food returns between £6 and £8 to society in the form of social and economic outcomes including health and well-being, training and skills.

However, despite the benefits, setting up or transitioning to direct sales models is not always an easy route because it requires farmers and growers to learn a range of new skills and develop more complex businesses, often becoming retailers as well as producers. This has put many producers off developing local markets.

With this document we are aiming to make the pathway easier and focus farmer-led innovation on overcoming some of the barriers so that more producers can create sustainable and resilient livelihoods from direct to customer and short supply chain sales of local food.

This guide covers some of the basic questions and signposts readers to resources that those starting or converting to direct sales models may find useful. It includes an introduction to thirteen different direct sales models and overviews on some of the more challenging parts of small farm business management, including legal structures and accounting software. Each section includes links to further resources.

The right sales model for you and your enterprises is going to be unique, and will take time, thought, trial (and error) to develop. It would be impossible to cover all the possible avenues and options so we encourage you to treat this as a source of inspiration and ideas that need to be tailored to your context. Innovation, adaption, courage and communication are essential for this, and the scope for successful enterprises is wide.

History
Direct marketing business models and short supply chain food retail systems have their roots in per-history. As such, they are as old as anything we might call either a market, or a business model. To understand what we are trying to achieve with contemporary short supply chain food systems, it is useful to know a bit about the history and role of the long supply chain food system.

Supermarkets dominate the modern food industry. They are power centers that mediate the relationship between a massive number of farmers and customers. As such, they wield tremendous economic and political power. Developing a sustainable food system must involve either changes in the decisions made by supermarket executives, or the creation of alternative retail systems that re-establish the relationship between customers and farmers. In all likelihood, a combination of public and political pressure on supermarkets, and the development of alternatives to the super market system, will be the best chance we have to make progress towards sustainable land use within our farming system.

Both market gardening and home allotments, and production line manufacturing of durable food products, were important parts of the war effort in world war 2. After world war 2, the companies that manufactured these durable food products became the largest private organizations in our food system. These food manufacturers, the likes of coca cola and nestle, were the largest institutions of consolidated corporate power within our food system for a number of decades. During this period, durable food products were sold through a mix of independent shops, shop chains and franchise companies, like local news agents or Spar. These shops shared the high street with greengrocers, butchers, bakeries, and the like. This changed with the rise of Supermarkets in the 1990's. To achieve market dominance, supermarkets had to provide both durable and perishable food, in order to allow customers to get their entire diet from the supermarket without needing to visit the high street. For supermarkets to take over from food manufacturers as the dominant power withing the food system, they had to make huge investments in cold chain infrastructure, building on the logistical systems of containerization and palletization that emerged over the course of the 20th century.

This basic fact, that perishable food products are more difficult and expensive to transport long distances than durable food products, goes a long way to explaining the strategic significance of horticulture within the food system. Short supply chain business models find it easier to compete on price and quality with more fragile food products, there are more successful short supply chain businesses in horticulture than any other sector, horticultural short supply chain businesses have a longer history, and if we hope to achieve significant growth of the alternative food system, direct marketing of horticultural food products is our most effective way to re-establish the relationship between farmers and their customers. We are the tip of the spear.

A second observation that it is important to make, is that the market is very sensitive to convenience. Many of us who grow and sell vegetables directly to our local community rely on the loyalty of a dedicated customer base. This customer base has been the life blood of veg box schemes and market gardens for decades, and it is critical that we nurture and develop this customer community. However, to grow beyond this community of dedicated customers, it is important to find ways of providing something approaching the convenience of supermarkets. To provide a customers whole diet through a single retail outlet, and preserve our commitment to the decentralization of power within the food system, entails collaborative decentralized organization. Co-operative food businesses and networks of businesses with shared marketing and distribution systems.

This is a guide to direct marketing business models for horticultural food products, and will cover box schemes, community supported agriculture schemes, pick-your-own, various forms of market stalls, farm shops, sale through local shops, sale to restaurants and catering companies, online shops and food hubs.